If you are retired or soon to be retired, you should make a plan for how you will get money in retirement. Most people’s plans will depend on Social Security, so it is important to know about the most recent changes to benefits.
In 2025, the Social Security Administration (SSA) will make some big changes to the program. One of these is the annual cost-of-living adjustment (COLA). This is all you need to know about the big changes that are coming to Social Security in 2019.
Over 72.5 million people depend on Social Security, so every year there is a big change to the benefits program and payments.
5 changes from Social Security will become effective in 2025
The cost of living adjustment (COLA) for 2025 will increase by 2.5%
The SSA thinks that benefit checks will go up by 2.5% in 2025. With the 2.5 percent change, retired workers will get an extra $50 a month in Social Security benefits starting in January.
For example, the average pay for retired workers will be $1,976 instead of $1,927. The payment for a couple where both people get benefits will go up from $3,014 to $3,089.
The Consumer Price Index for Urban Wages and Clerical Workers (CPI-W) has been used by the Social Security Administration to tie COLA changes to since 1975.
The SSA figures out the COLA by comparing the third-quarter CPI-W of this year to that of the previous year. The annual percentage change in CPI-W is then used to change the COLA.
The SSA will increase the maximum taxable earnings
If you work hard and make $168,600 a year, you will have to pay Social Security taxes. For workers who pay into the system, this means that wages up to that amount are taxed, usually at a rate of 6.2%.
As of 2025, the highest salary will be $176,100. This means that a bigger chunk of an employee’s salary will be taxed. This change is because average US earnings are going up.
Maximum Social Security benefits will also increase
The most a worker will get from Social Security will go up from $3,822 in 2024 to $4,018 when they reach full retirement age in 2025. This limit only applies to people who retire at the full retirement age, which for people born after 1960 is 67.
The largest payment will be cut for people who retire before they reach full retirement age. People who retire after the full retirement age, on the other hand, might get more money because they waited to retire.
Spouses’ and disabled workers’ benefits will increase too
In 2025, the average amount of all benefits will go up. This includes payments for widows, widowers, and disabled people. Here’s how these numbers are broken up:
- The SSA says it will increase from $3,669 to $3,761 for the average widowed mother with two children.
- Aged widows and widowers living alone will see their benefits increase from $1,788 to $1,832.
- The benefit will increase for a disabled worker with a spouse and one or more children from $2,757 to $2,826.
Social Security will adjust earnings test exempt amounts
If you start getting retirement benefits before you reach full retirement age, the program may cut your benefits if your earnings go over certain levels.
This is known as the “retirement earnings test,” and if you are still working, it could mean that a big chunk of your benefits are taken away. The levels of earnings that will not count toward the retirement earnings test in 2025 are expected to be:
People who start getting Social Security benefits before they reach full retirement age can earn up to $1,950 a month ($23,400 a year) in 2025 before their benefits are cut off. The most money that was not taxed in 2024 was $22,320 a year, or $1,860 a month.
The rule is in place until the full retirement age and has more lenient rules. In 2025, you can make up to $5,180 a month, or $62,160 a year, before benefits are taken out.
You will get $1 in benefits for every $3 you earn over this amount. In 2024, the barrier was $4,960 a month, or $59,520 a year.
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